Section 529 - Simple, Tax-Deferred
Do you earn more than $ 35,000 a year and have children age 18 or younger? If so, according to a survey done for Fidelity Investments, the mutual funds giant, your No. 1 financial goal is probably saving enough money for your children's college education.
Named after the section of the federal tax code that made them possible, Section 529 plans let states create a new program that provides a simple, tax-deferred way to save for higher education costs.
Other plan features:
• Contributors can set aside up to $ 50,000 per child at one time without incurring a gift tax, if they make no added contributions for five years. For high-net-worth individuals, that provision could result in considerable savings on estate taxes, said financial planning guru Ric Edelman, author of "The Truth About Money."
• Money invested in the plan grows tax-deferred until withdrawn for college, when it will be taxed at the child's tax rate, usually 15 percent.
• Money from a Section 529 plan can be used for any college expense, including room and board, books and incidentals. U. Plan money can be used only for tuition.
• 529 money can be used at any college in the United States. The U. Plan requires enrollees to attend college in Massachusetts.
• For those who win one of those hard-to-get scholarships, Section 529 plan participants can withdraw an amount equal to the scholarship without penalty.
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